Marathon Oil

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Relationship between retail price of gasoline and price of crude oil

In USA gasoline accounts for 50% consumption of petroleum products therefore it is closely monitored by public and research pundits. It is found that, there is asymmetric relationship (asymmetric defined: where one has much more power than the other or putting it differently, when two halves are not equal or same) between retail gasoline prices and crude oil prices -- particularly gasoline prices are more responsive to rising crude oil prices than falling crude oil prices. This is attributable to Market power, search cost, consumer response to changing prices, inventory management, accounting practice and refinery adjustment costs.

Basically, it's a competition that drives gasoline prices sharply upwards because of unspoken agreements between dominant players. When crude oil prices increases, gas stations increase the gasoline price and pass on to consumers immediately. In case...
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